2019 First Quarter Investement Commentary

Performance Measurement Pitfalls - Understanding Variability

FAI Performance Measures
Image by Gerd Altmann from Pixabay

One question we often get from investors is what return SHOULD I expect from my investments?  A very simple question, but one that has a very complicated answer.  I will try to simplify it here.  The expected returns on any particular portfolio is the byproduct of the expected returns of each of the asset classes owned multiplied by the percentage of that asset class that is owned.  This calculates an “expected return”. 
Here is a simple example:

Investment% of Portfolio
Expected Return
Weighted Return
Stocks50%8%4.0%
Bonds50%4%2.0%
Total100%6.0%

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